The Role of a CFO: motivating people, managing assets and hedging risks. Денис ДубовцевЧитать онлайн книгу.
and entrepreneurial skill. This is within reach of only a privileged few – the most successful and fortunate companies. Nevertheless, effective organizational management, comprising technical tools alongside the right corporate culture – data-driven planning, process organization, technology application and automation, team selection, a strategic decision-making approach, and motivation – are the cornerstones of regular management.
What distinguishes common sense from professionally constructed management? The former occasionally falters, and the absence of a dedicated finance manager can lead to the absence of management accounting and the emergence of strategic risks. Another significant risk factor is that the longer a company evolves and internal processes develop without a corresponding specialist, the more challenging (and painful) it becomes to restructure these processes in the future and transition to regular financial management.
Any sustainable business hinges on timely financial decision-making. In broad terms, this encompasses everything that determines its health and longterm entrepreneurial success: accurate assessment of business opportunities, efficient resource utilization (not solely financial), timely engagement in specific projects considering prevailing and anticipated economic conditions, partner and employee selection, motivation, and much more.
Upon conceiving an entrepreneurial idea, financial management becomes imperative: one must assess possibilities, calculate required resources for realization, and evaluate associated risks. Even in daily life, financial management permeates all activities. Each of us engages in numerous iterations daily, choosing products at the supermarket, evaluating the option of using a taxi instead of the subway, weighing the risks of purchasing cheaper goods or services, and devising expenditure plans for significant purchases. A closer examination reveals that our routine decisions adhere to basic financial management principles, intuitively embracing budgeting to achieve tactical and strategic life goals. The same applies to businesses: all financial processes demand structure and streamlining.
In financial management, several key components can be identified and, based on them, all financial tasks can be conditionally categorized into four blocks: personnel management, providing management and external users with decision-making information, asset management, and risk management. Why «conditionally»? Because these blocks are interconnected. Personnel management and motivation form the bedrock of all management processes, while risk management entails integrating control points and procedures into nearly all processes influencing financial management. Providing decision-making information essentially serves as the instrument panel for management, empowering the allocation of an organization’s assets.
People management stands as the linchpin of any collective endeavor, determining both successes and failures. Broadly speaking, even individual resource management can be efficiently structured under the encompassing concept of resource management applicable to group management. The essence of any manager’s role lies in the efficient utilization of resources. In modern business, people are recognized as the primary resource, maximizing added value in most countries. Hence, I accord precedence to personnel management: searching, hiring, motivating, and orchestrating the effective deployment of talent.
Subsequently, specific aspects relevant to financial management are addressed. It’s noteworthy that financial management significantly relies on in-depth knowledge of production (operational) business processes, legal functions and compliance expertise, understanding of the company’s technological infrastructure, familiarity with business marketing channels, and more – all of which impact managerial decision-making. However, for the scope of this discussion, emphasis will be placed on financial management, so I will thoroughly examine the key areas of financial management while others will be mentioned in passing.
Thus, the first financial block within the company management system to be explored is financial and operational reporting for decision-making by both external and internal users. This encompasses tax reporting for government authorities and consolidated reporting per international standards. The latter is essential for internal users (management and shareholders) and external users (tax authorities, potential investors, banks, and other interested parties) alike.
The second block involves asset management in a broad sense, encompassing the management of available internal and external resources, process organization, and business efficiency improvement. Asset management extends to activities such as optimal supplier selection. Furthermore, in recent years, possessing a strong banking history has become a highly valuable asset, particularly for international business operations and ownership of companies in multiple countries. Opening and maintaining bank accounts in the modern, fragmented, and sanction-limited banking landscape demands considerable expertise and sustained investment in relationships.
Lastly among the key financial leadership tasks is risk management: establishing internal controls to enhance business efficiency and mitigate situations where employees abuse their authority, whether intentionally or inadvertently. This includes the classic understanding of the control environment outlined in manuals for international financial reporting standards: corporate-level controls, information system controls (or IT controls), as well as financial controls.
Together, these delineated blocks constitute a complex network of interconnected elements of financial management. Ensuring proper process configuration, facilitating information exchanges, synchronizing participant actions, and implementing timely and adequate automation – these are all hallmarks of competent financial management and serve as essential prerequisites for the development of any business, whether they are commercial or non-commercial ventures.
In practice, the financial function seldom evolves at a pace commensurate with business growth. Typically, management and corresponding process development struggle to keep pace with core production process expansion. This discrepancy is not due to a lack of motivation on the part of financial leaders but rather stems from the residual resource allocation principle. However, this phenomenon extends beyond finances and applies to all service (non-core) functions for businesses. Nonetheless, neglecting the aforementioned aspects, whether deliberately or due to lack of knowledge, underinvestment in infrastructure, process construction and automation, as well as in financial department resources, significantly heightens business risks, often culminating in bankruptcies.
Chapter 1
Finance in Company Management
The Role of а CFO
The position of Chief Financial Officer (CFO) differs fundamentally from that of their counterparts in company management. The CFO primarily serves the shareholders and only secondarily the CEO. While this principle is universally accepted in modern business and international law, it may not always be intuitively clear to CFOs themselves or their immediate superiors.
However, it’s essential to understand that the CFO is not in opposition to the CEO and the management team; rather, they are an integral part of it. Nevertheless, what sets them apart from other leaders is their role as internal skeptics and sparring partners in strategy discussions. Additionally, the primary focus of the financial leader and their teams is to provide accurate information to all stakeholders within and outside the company for decisionmaking and risk management purposes.
Traditionally, the CFO’s responsibilities included financial planning and analysis, budgeting, management accounting, tax reporting, and liquidity management. One notable recent trend in business management is the expanding role of the CFO in business development and strategic operations management. The CFO is evolving from being solely an accounting specialist to becoming the CEO’s right-hand partner and a permanent member of the board of directors.
Over the last 30 years, the strategic responsibilities of the CFO have undergone significant transformations. In the 1990s and 2000s, particularly in most developing countries and many developed ones, CFOs had to establish tax optimization systems involving international tax havens and secure timely bank financing, often relying on personal connections and tolerating conflicts of interest. The few exceptions among senior managers and bankers, primarily from top-tier institutions, merely reinforced this general trend.
In the 2010s, intensified competition across most industries, including global players, rapid technological advancements in public